CMHC says Fort McMurray housing will be rebuilt, but has no timeline for when

The Crown corporation says displaced individuals and construction workers will need temporary accommodation which should put a dent in the vacancy rate

About 10 per cent of all structures in Fort McMurray were destroyed by the wildfires and even though the housing market was declining in the face of low employment caused by dropping oil prices, CMHC expects some new home construction.

Charles Iggulden predicts all of his town will be rebuilt, but the president of the Fort McMurray Construction Association says it just comes down to when.

In a report out Thursday, Canada Mortgage and Housing Corp. said about 2,500 starts would have to be created to match the 1,928 structures the Regional Municipality of Wood Buffalo says were destroyed when wildfires swept through the region north of Edmonton in May. About 10 per cent of all structures, which includes detached homes, semi-detached homes, row houses, condos and non-residential structures, were destroyed.

“The biggest thing right now is cleaning up some of the areas and that is going to take awhile before we can start rebuilding,” Iggulden said. “I have mixed feelings (whether it will all be rebuilt). There are plans to move things around and make it better than it was because some of the places that burned are from the 1960s. There will be a lot of upgrading.”

CMHC, the Crown corporation that advises the federal government on housing, says Fort McMurray reconstruction will be strong, but it’s not likely to begin in earnest until 2017. The potential exists for construction to be higher than during the peak year of the oil boom when 2,200 homes were started in 2007.

“I think if we buy locally, hire locally, this will help the whole community and allow it to rebuild,” Iggulden said. “The spinoff could be huge.”

In the short-term, CMHC expects Fort McMurray will get an almost immediate boost to the rental vacancy rate, which was at 29 per cent in October 2015, when it was last measured. With residents and workers moving back, that rate is expected to fall.

Northview REIT, which has about 870 units in Fort McMurray, is also seeing a bit of a bounce back in the last few weeks, the result of workers returning and needing a place to stay while the town is rebuilt and residents who don’t have homes to go back to, said chief executive Todd Cook.

“We are seeing a lot more traffic and there will be an uptick in occupancy,” Cook said. “We’re focusing on making sure we have space for homeowners, but there is a fair demand from contractors too.”

The support for Fort McMurray’s real estate market couldn’t have come at a better time. Construction starts in 2015 totalled only 74, the lowest level since 1997. This year only 13 new homes have started construction.

The resale market hasn’t fared much better, with existing home sales down 43.5 per cent in 2015 from 2014. Prices have also slumped. The average sale price across the Multiple Listing Service system was $504,097 in the first quarter of 2016, which compares with $608,738 two years earlier. Rental rates dropped 12.7 per cent in 2015 from 2014.

“We are expecting most of the structures to be built,” said Timothy Gensey, market analyst for the prairies and territories region for CMHC. He says municipal policies and insurance will determine how much of the town gets rebuilt, but said active home listings were high before the fire so some returning residents could look to the existing home market rather than building something new.

Part of the problem in predicting what happens with Fort McMurray is still a matter of guessing where the price of oil is going to be.

“We can’t really tell. If oil surprises on the upside, we’ll get economic tailwinds from an unexpected jump in prices and the reconstruction activity,” Gensey said.